LABOR DAY 1909: PARTY IN THE STREETS

The Opening Print

For traders the holiday signals the return of both Europeans and Americans to work from the summer holiday. It marks a time when the markets should start to pick up from the end-of-summer slowdown. This year we don't think they will, at least not right away. With Europe seemingly stuck in its never-ending debt problems and the Fed on guard for some type of quantitative easing and the election less than three months away, we could be in for more of the same. We do not know what lies ahead for the stock market and its volumes, but what we do know is the struggle continues. And yes, Americans across the country will be celebrating the holiday, but not with the zeal of many years ago when America's economic engines were in full gear. And yes, the United States and its people are in an economic downturn, but if history actually does repeat itself, somehow, some way, Yankee ingenuity will prevail. I am proud to be an American and I will be celebrating the Labor Day holiday with my family and friends at a big cookout at my house … you're all invited! Our view:
This week all the imbalances have been to the sell side. Is smart money taking some profits in front of today's Jackson Hole Fed meeting? It sure looks that way. There is big speculation that this morning Bernanke is going to present some quantitative easing plans and that next week the ECB's Draghi will also put something on the table. If the Fed does step up, the futures will rally, if he doesn't say anything positive then the S&P will sell off and have to wait until next week's ECB meeting. Our guess  isboth will have something positive to say, but with all the CME markets closed by 12:15 CT, the party may not last very long. There is also a question of how many people are actually around to listen. Our view is that the S&P did exactly what we were looking for it to do yesterday, it retested the 1395 low and held. We are not going to tell people not to trade, but what we will say is if you get a winner, take it and get out. We lean to buying the pullbacks both today and Tuesday. As always, keep an eye on the 10-handle rule and please make sure to use stops.
Thursday, 30 Aug 2012 US NYSE Imbalances – USD 700mln to sell
Wednesday, 29 Aug 2012 US NYSE Imbalances – USD 500mln to sell
Tuesday, 28 Aug 2012 US NYSE Imbalances – USD 170mln on the sell side
Monday, 27 Aug 2012 US NYSE Imbalances – USD 870mln on the sell side Thursday started with 183k ESU and 625 SPU traded on Globex, trading range 1401.10 – 1407.40 / Wednesday's range 1412.50 – 1404.80, settled 1407.20 down .6 handles. Same store sales were better than anticipated, but fail to stop  the pre-market bearish momentum. Today's RTH's gapped 5 handles lower to open at 1402.30 – 1401.80, printed a high of 1402.60 before taking out the the stops below 1400 and marking 1395.40 low by 9:55CT.  EUBIE (9:48:52): with the “3′S Rule / ya wanna buy the 1396 for a scalp back thru 1397 WIDOWMAKER & the 1400 print. By 10:40 1400 traded and faded back to 1397 before the sideways to slightly higher and back trade set in… The DJIA was down 100 points by midday, Roger_Volz (11:43:07): higher lows ES1 5 min / NQs 15ers. the spoos were trading 1399.50 area at noon, making multiple tops before being rejected and fading back to 1397 again. The bulls popped it back up 1400.50 by 1:10 and then back down to 1398. Yesterday we welcomed a new contributor and today he posted jack_broz (13:09:48): SPs want to test 1402.25 now. remember: do not get caught short above 1406.50! jack_broz (13:11:46): i'm looking to buy dips (to those pivots) in bonds/notes, i want to dade the first touch of 02.25 in SPs. i'll leave you with that and stop back in tomorrow. Just before 2:30 the futures got hit by a small buy program as it took out small buy stops up to 1402.30, high of the opening range and short of the 1402.60 HOD. At 2:45 the imbalance showed MOC sell $700mil and the SPU traded back down to 1398.00 area. 1398.50 traded on the cash close before settling at 1397.20, down handles. Key dates: Note Jackson Hole schedule *Draghi canceled his appearance: http://tinyurl.com/bmymzxv
Timeline of key events in the Eurozone through 9/6:
- Aug 31  Italy T-bill redemption for E8.75bln
- Aug 31  Italy zero coupon CTZ bond redemption for E11.501bln
- Aug 31  EFSF Regling, EU Weiser speak in Austria
- Aug 31  Jackson Hole symposium
- Sep 1   Spain VAT hike to take effect
- Sep 3   Spain regional Q2 public finance
- Sep 4   Italy Monti to meet France Hollande
- Sep 4   EU Van Rompuy to meet Germany Merkel in Berlin
- Sep 5   EU Van Rompuy to meet France Hollande in Paris
- Sep 5/6 Euro-Working Group/Economic Finance Committee meetings
- Sep 6   OECD Economic Outlook report
- Sep 6   ECB meeting, Draghi to give ECB Staff Forecasts

Geez, what is Labor Day, anyway?  It happens at the end of every summer and I am embarrassed that several of my friends actually did not know what the holiday stood for. The answers were so bad I could not believe it. How could so many adult Americans not know what a federal holiday represents?

The exchange is closed on the first Monday of September for the Labor Day federal holiday, which this year falls on Sept. 3. Many years ago Americans used to proudly march in the streets celebrating the social and economic contributions of our nation's workers. The holiday started back in 1882 when a machinist by the name of Matt Maguire came up with the idea while working for the Central Labor Union (CLU).  In 1887 Oregon (believe it or not) was the first state to make the day a holiday, and it became a federal holiday in 1894. But it didn't happen without some problems. During the Pullman strike, several workers died at the hands of the U.S. military and marshals, and fearing a wider conflict, President Grover Cleveland reconciled with the labor movement and Congress quickly made Labor Day a national holiday. The September date was chosen by the CLU of New York and was observed by many of the nation's trade unions. Originally marked by street parades to exhibit the strength of the labor organizations and festivals for workers and their families, nowadays the holiday is a big time for political demonstrations and speeches. But most Americans spend it enjoying family barbecues and other outdoor activities as the last hurrah of summer before school starts back in earnest.

MrTopStep Closing Print Video : http://www.mrtopstep.com/videos/?id=26423

• It's 6:00 a.m. and the ESU is up 5.5 handles, crude is up 66 cents at 95.28 and the EC is trading 1.2592, up 83 ticks.
• In Asia 6 out of 10 markets quoted closed lower.
• In Europe 11 out of 12 markets are trading higher (CAC 1.4%, DAX +1.03%).
• Today's headline: “Stocks, Commodities Rise Before Fed; Spanish Bonds Drop”
• Economic calendar: Chicago PMI, consumer sentiment, factory orders, farm prices, Bernanke's Jackson Hole speech.

• VOLUME (LOW): 1.2mil ESU and 9.4k SPU traded
• SPREADS: 210 SPU/Z spreads traded
• FAIR VALUE: S&P +4.50, NASDAQ  +15.00

Thursday's S&P 500 futures wrap-up:
The Asian markets reversed early weakness as China's Premier Wen said that China would continue to buy European bonds and Italy sold 5 and 10-yr bonds at lower yields. Over the last week, the S&P 500 has marked time by trading in a tight, defensive, stepping lower range after printing 1424.60 multi year high on 8/21/12. The Eurozone headlines have picked up since, the rise in Spanish bond yields / banks are still front page news and todays Jackson Hole symposium have kept traders watching the tape for any clues on the next leg of the market as the equities are testing some key areas of support. Growing numbers are not convinced the news from Fed Chairman Bernanke's commentary will be definitive news of QE at all…but the markets will be susceptible to an obvious pick up in volatility. Many of us have asked for that and now it is here. Scroll down to see both key dates & timeline of key events in the Eurozone.

Posted Tuesday 8/28 – Midday chatter included Credit Suisse is expecting big bond sell-off post Bernanke Jackson Hole speech based on the last 4 meetings. Also, Put buying in SPX September quarter end 1385 puts continued, someone is up to 25k today plus 12.5k yesterday. To put this in context, this is $5.2 bln strike notional, $1.8 bln delta notional and spent $40-50mm in premium.

MTS charts: 240m trend line holding so far by Andy Harrison: http://screencast.com/t/4t4qS3db

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CONTRIBUTORS' CORNER

SPX CHARTS

Roger Volz, BGC Partners

SP 500 Futures 60 min Chart and Indicator ….lateral wedge pattern lower highs higher lows is resolved to the downside, turning the technical stance and exposing some air to the 8/24 low at 1395.40l

ST OB > 1420.00 /// ST OS < 1394.00 unch

VST 15 min OB > 1414.00 /// VST OS < 1395.50

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